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Newsletter July 2013

FDI GREECE

FDI Trends in Greece and the International Framework

Results of the last UNCTAD World Investment Report 2013 show that Greece is performing well in attracting FDI funds.

According to latest UNCTAD Report, published June 26, 2013, global FDI inflows reached $1.35 trillion in 2012, recording a substantial decrease of 18.2% compared with the previous year. Following the international financial crisis of 2008, total FDI inflows recorded the highest decrease of their volume in 2009, reaching only $1.21 trillion (from $2.01 trillion in 2007). Afterwards, in the years 2010 and 2011, there was a partial recovery of global FDI inflows, reaching $1.65 trillion, still not approaching the levels before the crisis though. The decrease of global FDI levels in 2012 is indicative of the economic instability-fluidity that still underlies in many important economies and to a larger extent in economic coalitions such as the Eurozone, having as a result the insecurity and the increase of risk in every investment activity.

In this international context of decreasing global FDI inflows in 2012, Greece increased its FDI inflows substantially, from $1.14 billion in 2011 to $2.94 billion in 2012, surpassing the levels of FDI inflows of the year 2007. This performance is of great importance, considering the fact that the country is in the 4th consecutive year of severe economic crisis, as a result of a large-scale fiscal adjustment.

Taking into account the negative image of the country abroad during the last years, because of the excessive percentages of public debt and deficit, as well as the political uncertainty during the first half of 2012, the importance of the increasing trend in FDI inflows in Greece is more evident. Even if these levels will be revised downwards to some extent in the future, which is possible as a result of the international methodology in calculating FDI (where the losses of foreign companies in a country are calculated as negative reinvested earnings), the increase compared with the years 2010 and 2011 is expected to remain significant. 

Despite their positive trend, both the absolute levels of FDI inflows in the country and—more importantly—their type, don’t allow for overzealous celebrations. FDI in Greece is still a small percentage of the gross capital formation compared with other countries, and in its largest part it is not directed to new (Greenfield) investments but mainly to increases of share capital from the parent companies to existing subsidiaries in Greece in order to strengthen their position. Even by this structure, though, the will and trust of the foreign parent companies to support their affiliates in Greece, after the elimination of Grexit danger in 2012, is evident.

It must also be noted that UNCTAD’s report refers to the net FDI inflows in each country and not to the total (gross) ones that, after all, reflect the real FDI that is attracted. Greece’s performance in attracting foreign investments is much higher than mentioned in the report (more than 4.4 billion Euros according to the Bank of Greece), but is substantially decreased due to the calculation methodology mentioned (negative reinvested earnings because of losses in enterprises, which is a common phenomenon during periods of crisis).

As far as the sectoral orientation of FDI inflows in 2012 is concerned, the financial institutions occupy the leading position according to the Bank of Greece, followed by the chemical industry, food and beverages and real estate.

France occupied, by far, the leading position in the increase of FDI in Greece in 2012, followed by Belgium, Germany and UK. 

The prospects for Greece are promising, because of the country’s comparative advantages, the formation of an attractive investment climate due to a number of reforms implemented, as well as the increase in the sources of potential investors. Apart from traditional investors originating from the EU, a growing investment interest from Asia (especially China), the Arab countries and Russia is evident, as a result of targeted investment promotion actions. The increase in the investment activity will depend of course to a large extent on the continuation of political stability and—mainly—on the acceleration of privatisations and the commercial development of public property, that can set off large scale investment activity due to their volume. 


Investor Fund for Municipalities, Renewable Energy Sources, and Business Parks

Attica Finance SA and the Chinese group of companies SUMEC signed the first cooperation agreement since the visit of representatives of the municipality of Athens to Beijing earlier this year.

Attica Bank, along with Attica Finance SA, the Central Union of Municipalities of Greece (KEDE) and Information - Training - Local Development SA (PETA SA), in cooperation with the Deposits and Loans Fund, have agreed to establish a fund that will invest primarily in projects relating to local government, street lighting, trash, desalination, biological purification, renewable energy sources, and business parks.

The collaboration with the SUMEC group of companies includes the supply of machinery to projects that will be implemented with the participation of the investment capital fund by Attica Bank and Attica Finance SA (under establishment).


Al Dahra Acquires 10% of Loulis Mills

Al Dahra Agriculture Spain SL acquired 10% of the share capital of Greece’s Loulis Mills SA (i.e. 1,522,228 shares) on May 21, 2013.

"Loulis Mills S.A." and Al Dahra Agriculture Spain SL signed a contract, according to which Al Dahra will cover the capital increase through a private placement of 7.8 million Euro. This way Al Dahra will acquire an additional percentage, so the entire stake after the share capital increase will reach 20%.

"Loulis Mills S.A." will start all processes in order to implement this increase as soon as possible.

Al Dahra Agriculture Spain S.L. is a 100% subsidiary of Al Dahra Holding LLC (Al Dahra). Al Dahra is based in Abu Dhabi, United Arab Emirates (UAE) and has invested in UAE, USA, Spain, Serbia, Egypt, South Africa, India, Morocco, Namibia, and Pakistan.

Al Dahra is active in the agricultural sector and specialises in the production of agricultural products and animal feed. Al Dahra is the strategic partner of the Government of Abu Dhabi in the field of food assurance programme for the UAE (Food Security Vision).

The partnership with "Loulis Mills S.A." links the company directly to primary grain production, thus ensuring a high degree of stability and qualitative and quantitative adequacy of raw materials. It furthermore connects "Loulis Mills S.A." closely to Arab countries, that experience a large population increase and import flour. These countries can now easily be supplied with flour by Al Dahra through the two modern mills of "Loulis Mills S.A." This partnership sets strong financial foundations for further growth and opens the way to the developing markets of Africa and Asia, which generate 85% of the annual global population growth. The population of Asia and Africa together increases by about 70 million people annually.

In addition, this partnership provides access to a high-tech manufacturing and transit in Europe through the facilities of "Loulis Mills S.A." in Volos and Piraeus, with a total storage capacity of 90,000 tons. This way Al Dahra will be able to move production from European countries (Spain, Serbia) to the Middle East. This agreement also helps to ensure the supply of flour with guaranteed excellent and consistent quality to Arab countries, many of which have long-term contracts. Al Dahra also gains access to know-how in building grinding mills, so they can complete the construction of standard grinding mills in other countries in which they operate.

With this move, the company’s President, Nick Loulis, position "Loulis Mills S.A." at the heart of development, gaining access to four continents (Asia, Africa, America and Europe) and 97% of the earth's inhabitants.